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Publication Date

2007

Abstract

American charities manage substantial funds in conjunction with carrying out their charitable purposes, holding some funds for current operating needs and others as endowments. The legal rules on managing and investing those funds have worked well, but are now somewhat out of date, and revisions to these rules will benefit donors, charities, and charitable beneficiaries. Because laws regulating charities come from a variety of sources, including trust law, nonprofit corporation statutes, federal tax laws, and additional state statutes, this Article does not address the full panoply of regulations governing charities. Rather, the Article takes a narrow focus: the investment, management, and modification of charitable funds subject to the Uniform Management of Institutional Funds Act (UMIFA) and the revised version of that Act, the Uniform Prudent Management of Institutional Funds Act (UPMIFA). UPMIFA represents several years of effort and input by charities,lawyers who represent charities,donors, banks, law professors who study trust law and nonprofit corporation law, state charity officials, accountants, and other interested persons. The improvements in UPMIFA should guide charities in managing their investments and controlling their expenditures in ways that will protect donor intent and result in more effective use of charitable funds for charitable purposes. This Article analyzes these improvements and the process by which they were adopted. The story of UMIFA and the decisions made in revising UMIFA to create UPMIFA provide interesting insights into the development of the law that governs funds held by charities. This Article's analysis of the changes made in UPMIFA can provide guidance to legislatures considering enactment of UPMIFA and serve to assist charities and their advisors in interpreting UPMIFA after its enactment by the states.

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